Low Start Endowment

This may be available on a low cost endowment, unit linked endowment or unitised with profit endowment policy. Initial premiums are lower and gradually increase by a given amount, eg 20% per year over the first five years.

Advantages:
• Can be useful if the borrower does not have a surplus of money at the beginning of a new loan.
• May be suitable for borrowers who have potentially increasing incomes, eg borrowers who can expect high salary increases over a period of time.

Disadvantages:
• The premium will be higher than the equivalent level premium policy.
• May not be suitable for those on a tight budget.
• Sometimes combined with low start interest rates to produce a minimum initial outlay for a mortgage.
• Problems may arise if earnings do not rise as expected.